As per the ITAA 97 – Section 108(10), the loss is not adjusted against the ordinary gain. Thus, Eric’s earning from ordinary shares sale will not accounted for set-off. Moreover, the earning from ordinary asset sale is not an income from present year (Wallace, Hart and Evans 2013). Further, for the above calculation, loss arising from sound system will not be accounted for offset as it is a personal asset. Therefore, total capital gain amount is $ 15,000.
2. Under the ruling of ATO, the employers are liable to pay the fringe benefit tax if he offers some specific benefits to the employees or their associates and families. The employee here may be the future employee, past employee or the present employee. Further, the fringe benefit with regard to loan is considered if the employee is offered a loan with lower or zero interest rate (Somers and Eynaud 2015). Moreover, if the payment of interest is allowed to be paid in more than six months period then the unpaid amount after six month will be accounted as a separate loan.
Calculation of Brian’s fringe benefit tax –
Brian will not have to pay any interest to bank, if bank offers him to pay the interest at the end of the year. Moreover, he will not be accounted for tax payment if bank makes his free from repayment of interest as according to the ruling of TR 93/6, any person is free to get the benefit with regard to offsetting of tax on payment of interest.
3. The given case study is similar to the case of MC. Donald Vs FC of T under which the Mr. Mc Donald was eligible for 25% profit and his wife was eligible for rest 75%. However, the entire loss was to be shared by Mr. Mc Donald only. However, the ATO was in the view that the relationship will not be treated as partnership rather it will be co-ownership. Moreover, the private agreement with regard to profit sharing cannot override the taxation ruling that Mr. Mc Donald will be eligible for deduction of 50% only (Freedman 2016). Therefore, with reference to the case study of MC. Donald Vs FC of T Jack will be eligible to claim 50% of loss or ($ 10,000*50%) = $ 5,000. Therefore, Jack and Jill must share the amount of loss equally.
In case of sale, if any capital gain or loss arises, that can be shared as per the preference of Jack and Jill and here the level of partnership will not be taken into consideration. Further, the income from capital gain will not be taxed as partnership income rather it will be taxed as individual income.
4. The IRC v Duke of Westminster (1936) case study depicted the tax avoidance scenario where the taxpayer stopped the payment of gardener and instead entered into new agreement to pay the exact amount. It enables him to be eligible for deduction with regard to his taxable income. The case further explains that any person may make the tax planning based on his preference and he cannot be in any situation obliged for higher tax amount (Edmonds and Raghavan 2017).
The case is relevant in Australia is the way that is states that case further explains that any person may make the tax planning based on his preference and is free to chose the option where he will have to pay lower amount of tax in comparison with other options.
5. The given case can be compared with two cases as follows –
- Stanton v FCT (1955) – here the taxpayer entered into an agreement with saw miller who agreed for lump sum payment based on the timer available in land
- Mc Cauley v FCT (1944) – here the taxpayer were entitled to lump sum payment based on the entitlement to cut the timber and the time for which saw miller will perform the task.
As per ATO, the 1st case will not be relevant as the payment was based on the quantity. However, the 2nd case will be relevant as the payment was based on the entitlement of cutting the timber (Dunne, Mason and Patto 2014)
With respect to the relevance of above 2 cases, in case of 1st option bill is liable to pay tax for the amount received. However, in case of 2nd option the amount of receipt will be accounted as royalty.
Dunne, J., Mason, J. and Patto, J., 2014. 2013 cases show high ATO success rate. Taxation in Australia, 48(8), p.429.
Edmonds, M. and Raghavan, R., 2017. Outbound investment tax issues. Taxation in Australia, 52(3), p.162
Freedman, J., 2016. General Anti-Avoidance Rules (GAARs)–A Key Element of Tax Systems in the Post-BEPS Tax World? The UK GAAR
Somers, R. and Eynaud, A., 2015. A matter of trusts: The ATO's proposed treatment of unpaid present entitlements: Part 1. Taxation in Australia, 50(2), p.90.
Wallace, M., Hart, G. and Evans, C., 2013. An evaluation of the contribution of Justice Hill to the provisions for the taxing of capital gains in Australia. Austl. Tax F., 28, p.123.